General Motors agreed to sell its Allison Transmission commercial and military truck business to the Carlyle Group and Onex for $5.6 billion.
The Detroit based automaker is battling to revamp its auto business and is busy reconstructing its business to get its pinnacle position back from Toyota motors. The proposed sale is the latest example of a cash-strapped automaker selling off a big piece of it to a private-equity firm. Carlyle Group and Onex will have a 50-50 percent holding in Allison Transmission.
Allison, which governs the market for delivery vehicles, work trucks and school buses, had about $2 billion in revenue last year and employs 3,400 people. The deal includes seven manufacturing plants, most of which are in Indiana.
GM will keep an Allison plant at White Marsh, near Baltimore, which builds transmissions for pickup trucks and sport-utility vehicles, and gas-electric hybrid systems for trucks.
Battling for funds, the automaker is confident that the deal will shore up GM’s liquidity capacity and will provide additional money to support new products and technology investments. But analysts were singing in different rhythm, saying that GM may be stockpiling cash that the automaker might give to the United Auto Workers in exchange for an agreement to limit GM’s responsibility for future medical costs for retirees.
Among other Detroit based automakers, all had lost their lucrative North American market to Asian rivals. Toyota leading the race, while other automakers like Honda and Nissan are following it.
Rising gasoline prices is the main destructor behind American automaker’s fiasco. GM and Ford’s gas engulfing vehicles added additional expenses in the list of customers, whereas on the other side, Asian automaker’s fuel-efficient vehicles overlap the market.
To catch up, all major Detroit-based automakers are implementing reconstruction plan, in which they are selling loss making units and reducing workforce to cut additional unwanted expenses. Ford has sold Aston-Martin brand to a consortium of private-equity investors and is further selling Jaguar and Land Rover luxury brands to revamp its business.
Last year, GM sold 51 percent stake in GMAC, its finance unit, to a group of investment firms led by Cerberus Capital Management for $14 billion.
To make their efforts more viable, Detroit-based automakers are preparing for contract talks with the UAW, which they consider as a turning point for the ongoing negotiations given the poor financial condition of the companies.
GM shares mounts by 74 cents and lifted its value up $38.15. The stock reached a two-year high during trading.
Via: Todaystrucking
